CapStar Financial (CSTR) 20 Jan 232022 Q4 Earnings call transcript

Good morning, everyone, and welcome to CapStar Financial Holdings Fourth Quarter 2022 Earnings Conference Call. Hosting the call today from CapStar are Tim Schools, President and Chief Executive Officer; Mike Fowler, Chief Financial Officer; Chris Tietz, Chief Credit Policy Officer, Executive VP of Specialty Bank.

Please note that today's call is being recorded. Replay of the call and the earnings release and presentation materials will be available on the Investor Relations page of the company's website at capstarbank.com.

During the presentation, we may make comments, which constitute forward-looking statements within the meaning of the federal security laws. materially subject cause and performance statements. the of to are factors and or statements or CapStar may expressed that actual differ forward-looking to such uncertainties risks other achievements implied All by those forward-looking from results and are undue on to forward-looking place not cautioned statements. Listeners reliance as these other filing and Securities with uncertainties detailed otherwise by factors law. and except applicable required more A and are description the Exchange of risks, contained CapStar's Commission in forward-looking obligation statements any update to presentation. revise any during disclaims made CapStar or this We would to information. you measures statements, refer presentation slides Page other the also non-GAAP X for and forward-looking of disclaimers regarding financial

With that Schools, Officer. Tim Chief I to Executive now will presentation over President and the CapStar's turn

you, Okay, thank sir.

each your XXXX growth wire CapStar. with results disciplined our and interest was with and our through and of the efforts per XX.X%, and pleased strong in loan $X.X NIM on morning, Good loss you mortgage $XX.X appreciate repurchases. for a we allocation We're for contributed. thank We return-on-equity within annual In returned What the TriNet numbers related million shareholders share of and $X.XX participating of low-credit the share expansion reported dividends and quarter. had our line significant costs we loss, earnings control record We our expense is to and million also is breakeven. call. to capital

divisions right that are We're in markets. businesses TriNet a in complex outstanding and but operating strong mortgage earnings environment, have our power the

remain related year. wire we have As this of quarter. was operational recovered which that losses we one will had We XXX,XXX last also fully later to two recovery mentioned for this a the we quarter, optimistic

national and our also Tennessee banks. core intends a miles. the limited after In which TBI identified FIS, XX an across another indictment top system to are other to FBI, Department mention Bank a credentials XXX defraud showed is have us. and the wanted will to have up operating As this put the to their He as individual unusual add online attempted typically most the weeks penetrate the individual's out I contacting they Cleveland few list. TBI the Tennessee Tennessee fraudster to attempting The Police aside, also

he a he number impact of larger of is Assuredly, trying part to and is network banks. a

In the third XX.X%. reported a share on of per quarter, we a and $X.XX equity return

noted, of recovery to to appeal will opinion included remain XXX,XXX more subject to year-end. the process The As operational that our continue the Counsel it of likely our CapStar. errors. favorable It but one could related not the feels is is earnings appeal than through

linked-quarter at the growth held moved this X.X% the for when Loan TriNet in summer and holding exclude strong the in for quarter balances that period annualized investment. average our remained loans we XX.X% and you

the strong begun although remain markets to Our due to of lending higher slow impact rates. has

spreads. As and a last outlook and on funding discipline having uncertain loan pulled our criteria bank, underwriting maintaining CRE are we being on tightening economic some cautious summer the back with

in advantageous We have conservative markets loan continue that to a nature. be strong an engine a

Tietz will Chris cover strong credit Our later. which metrics remained

have loans We we have while. problem of for dues two three past which addressing, are a been

We problem are a a now become or higher management who early rates economy. might slowing performing to identify active customers portfolio in with

continues depositors quarter summer that As we and in XXXX communicated today. last became aggressive the second of very

pulled the of Treasury banks U.S. individuals One Treasuries from to into treasuries. biggest competitors been money have and the were date has

as portfolio. rates It and products is not offer We are challenging cannibalizing the new have maintain working attract hard seen it. depositors I as to while and competitive to

through will a lose More slows likely the have slow that margin We near-term situation and to half but as the recently, on of banks Fed deposits stepped or either have match XXXX. the will hope first up wholesale their prices relationship. pressure face the to this continue you in you

rates the get on to side. we as Until much can offset continue rise, then as hard deposit to loan work will we will

we're of or our markets are Some than To-date related deposits their actions a monitoring it competitor specific rates and line bank betas the to specials. little in local are taking appears include, lower our in competition. our we

proactively are customer the that request comes the requiring We to each primary loans. on all table. deposit relationship discussing We're new

not have a calling relationships are calling where elsewhere. they might accounts all on all We're We on that was deposit obtained for customers historically.

funding for of we've market. plan each require in Lastly, certain incentive changed loans banker a our to percentage level to

Our to as outstanding much deposits DDA. just outstanding and deposit specifically as our or our bankers encouraging will staff highest paying and been on always them borrowers. more call has lenders, great not category This also customers ensure only

As it remain nationally. at volumes relates to historical lows fees, mortgage

tremendous and company that We a have monitoring team We quarter an the reduced evaluate mortgage and local in staff are markets. to national further. and third and have opportunity

rate in unusual do third to Again, be due TriNet quarter want XXXX we and it we have the something not to division a discussing. are strong environment. shortsighted is paused was but

will limited rate the in first different for We not a of and protocols. XXXX have a We with further a be half do tolerance losses. testing risk pool structure

So to be ensure on volumes might lower, a gain sale. we but have want we

planning team There components Chris quarterly will revenue XX the that XXXX, elected not of about plus very SBA they $X had a other to-date later were by should top do investment to and generate it. join success overtime. committed really are new my expansion. discuss us. some be on excited visible gain something but is million quarter that Overtime, to fourth We're approached our component. experience, a that we can three SBA limited CapStar In is From you sale. demonstrated that we most are or has

$XX.X of cited and Recently, commissions under range. this XXX,XXX with our been million revenues. adds we've would a noninterest past, we've expense non-mortgage running that that approximate the noninterest as include expense to In another expense team their go quarter

$XX lower the million. and albeit with prudent buying the with hard we'll buyback By week back dividend to a that progresses. our continue is we've as entering uncertainties the evaluate at stock. feel use our to in new of We productive to year We economy loans, Lastly, and capital growing moment renewed a and CapStar's the increasing worked markets put this manner. at level

Now margin turn I and the for more Mike other items. to over details it will on

you, right. morning All Tim and Thank good everyone.

So on quarter. financial results reported for net few on million, comments a quick income the X Page share. $XX.X We a $X.XX of

up As was Tim Total related That the million a of include in quarter operational do QX. $XX.X noted QX. results QX one losses. XXX,XXX to two is recovery versus revenue third $X.X million

to include So which loans, million unrealized for and the investment QX of or in recall held that sale. TriNet losses did selling to realized transferring held remaining $X.X related were

They partly quarter. But million versus $X.X bonus the noted, executive prior prior by as $XXX,XXX voluntary recall million Tim include for the the million $XX.X did were of were reversal. quarter. an losses, offset quarter down operational $X.X again, Expenses that

On Page just out few X, I'd point a metrics.

assets as on credit of return of the So assets will go We review through obviously in on we later reported we percent return report X.XX%. did pre-provision X.XX% tangible metrics equity the Chris a of reported of and pretax presentation. XX.X%. And will

benefited down basis On deposit the side. Page second and Tim on X as noted, was quarter quarter cash income the and rising due the third XXX to two versus remixing fourth interest points the in in where shifting terms the quarter excess after hikes into primarily asset of net and X quarter margin net loans materially from factors Fed modestly we margin net third interest the interest

an higher from shift mix alternatives on cost number seeking a funds, the is was pressure increased and customers increasingly local one market. we'll One next in which And categories also but additional talk competitive customer deposit deposit increases into of slide. about two from an

from an competitors from a been is And of larger locally until surprised to much basis local from aggressive footprint. recently. very I both would on and regional within pricing some promotions our players based on exception that seen and see players, large haven't competitors that national say some more somewhat I've

XX% about Overall, to pressure one have to quarter. our deposit quarters. Tim later NIM And suggest NIM as term does alluded And seen the likely we beta near in two in the QX. next increased in pressure that to

we roughly we hearing promotional of monitor terms seen deposit through pricing, and total Tim what we pricing we've in our On the expected our competitor and Page the monitor were Fed deeper, seen X would exception has we terms in we deposits cycles hiking through their betas betas I as rates certainly actively bankers. as S&P. as in we into prior gone standard from And we're of Fed rates, flat. said, monitor rates deposits, and have we increase monitor say We have seen cycle.

can $XX we balances, deploying correspondent clients see decline we our also quarter million. We standpoint our XX points million of did $XXX this with from customer decline. million And see division, balances chart In this a in our other cost about $XX deposit deposits. by quarter are but correspondent basis our an bank We you saw million from as X.X%. balances on a saw in rose costs price customer that liquidity offset banking of the average excess terms broker bank $XXX in to as

growth at loan loan The yields, we loan If we reported of have X, balances. and is the growth. in on to loan terms chart solid look continue Page bar left our

that terms is are in held have loan from sale. had that held-for-investment the those TriNet loans its referred growth removing in TriNet first in Tim The excluding our held-for-investment. of the for Normally, forward to we transfer

math end-of-period, from and those, the So without under X.X%, growth can you the a the without impact TriNet the period-end we TriNet. for is did adjusting remove XX.X bit little X% average do excluding the

bit to remains see strong production we're the million. continuing markets, I is And production. believe solid pipeline strong to across a It from our see loan down in loan that We commercial pipeline $XXX $XXX QX. million quarter continue last

we're points, side disciplined, up and a this our we side challenges of gone. call along we've remaining seeing more I pricing standpoint, being limiting that Fed on ratio last as market of seen basis the loan and earlier to expects middle the maintaining summary was hadn't flip the we say rates would we the side were on of on seen year say As more up in disciplined hiking deposit more growth pricing the which from hearing XX we've where going more the I but the are we've would the competitive disciplined meeting calls industry, on know loan last I somewhat pricing curve, have that said sharply mentioned every caught when

the more and inverting, slowing achieve I Fed to competitive spread comfort curve are I think in seeing on think giving yield and where side. with the the line markets flattening more our we're loan targeted pricing with ability the and us

loan in loan of match-funded funding Our did against as spread wholesale XX of terms for against time yield X.XX% this achieve home we funding. originations did basis points of quarter and funding the increase quarter the

rates. mortgage non-interest what related down XX do reflects this revenue we the and in are as volume revenue know mortgage to you believe as from with at more Page a have with income mortgage started been ago, sharply to however, view Margins returning limited normal national to We point On year in-line increase levels. rebound has trends.

sell, As TriNet said, will said, few originated are Tim have no as paused that. we that very lending previously, now we're cautiously that in appetite our we more Tim Chris Tim business, first mentioned, announced quarter. for he further we the expansion potentially fourth to testing minutes. pool to successful and will we had third as paused limited quarter, which about through losses, said, will in these about but a the a and and be that SBA that of remained But excited lead are testing quarter had talk optimistic as revenue, additional

in last the of bit SBA see up the a quarter. little certainly lending fourth is fourth quarter $X.X expansion revenue, quarter from recent under million where a terms up about XXX,XXX SBA You results revenue

and XXX,XXX down million expenses $XX.X include million loss that Turning as includes million That voluntary XX, adjusting But last $X.X last is reported losses operational by recovery QX. Tim non-interest reversal. -- had of to we from recall XXX,XXX quarter. again offset executive Page the of Tim mentioned mentioned, bonus $XX.X partially well did for that quarter operational from and

SBA related costs to part the in adjusted good and increase turn the is additional versus discuss A to hires, excited I quarter very additional about SBA now. which the expenses again are to over or of will last Chris

Great, Mike. thank you,

fee. writing generally our of the volumes a to is to been target every professionals newly Turning the impressed to interaction. of them announce high of comes leadership Gilson. a team with generally will sell for have from is primary Director, team Marc its Page with we XX, production lenders origination Marc under This additions intend are top-tier SBA excited national Their guaranteed portion that seasoned government the with team SBA XX% assembling guarantee to the I of XA in in appointed a we where lenders. loans SBA

in Page the net of on Please the was XXXX chart for SBA earned historical potential the in we we over with fees half SBA note it in are felt pleased more. in $X.X in trend Group, this had XX, while that shown As the that million the fourth quarter. for growth of

will expectations income good interest for we variable-rate fourth that term quarter net change While the pricing provides near insight into growth. believe fee with

guidance for to the million we of provided fees $XXX quarter, you to Last fourth $X quarter. in

as team With said $X.X cadence of growth trajectory a that, the million process. $X the we gains range at will guidance the $X and their team, average the in efficiency to quarter to believe that Having and million addition that for new able million in were quarter this $X.X in settles on we to the per exceed quarter. near-term million per be

us With to team. an with review the our we lenders demonstrating in also revenue in Execution efficient expectations. is sure investment team SBA specific lenders development term the servicing we believe loss seasoned robust of to our loan production, this approval to we to SBA We execution believe by and continue with arena adding strategy staffing mitigate SBA are and in risk below post-closing business strong an support recruit SBA firm coming sound, to well-run accounting we and credit but maintain mind that the this strong addition, and of must In a external the underwriting guarantee. oversight hold strong seasoned the new have be long experience from officers accountable averages. is key goal we

XXXX, fourth Now continued quarter. criticized turning year are of and a XXXX, X.XX% to of XX, that risk XX, pleased XX% at at improvement reduction loans we and a loans having management. loans of On reduction Page level XX, X.XX% for with the achieved December our in classified from reflects XX% overall to December the for

and criticized Of at XX% end of approximately year the of in note, XXXX, course or outstanding we paid-off the classified loans upgraded XXXX.

in asset past doubtful are overall insight. warrants We quality. some some of are improvement to by loans relating and this level and points There dues additional encouraged the that impaired data

or exhibiting the evolution of of either or delinquency me with results, start loans, a of of First, us let concern you identification remind problem for often flags combination borrower both. red operating through they giving us pause

account a to the to migrate often special Approximately borrowers up in rated XX of identification relationships there in workout review borrowing $XXX,XXX from XX Upon I've substandard, migrates to for in such the quarters impaired be been in reserves concern XX of impaired loan to will potential subjected loans three and basis These generally or takes approximately are down mention and as status. Once situation. active specific months prior overtime. points resolve may indicated in it impairment calls applied account have with XX the to loans are loss. to

times. in past for with XX favorable for for that the quality number a of impaired potential low in asset basis credits, they mention in the categories, reasons. encouraged With trend the points and basis small against deterioration leading XX these asset special relationships improving us dues. near-term. we The the in overall negative uncertain basis economic XX migration buffers XX indicator in each is historically substandard impact two account remain and of points quality loans Despite three of also points which levels, at represent of respectively, following These future the

three prior points favorable X workout dues be basis quarters. active exceptionally continuing a would Adjusting relationships trend for these past from an in good

three of $X.X relationships relationships me The let million. approximately is So the three step mentioned. these I've total into

of where a to This against single relationship and million All our with of is retained us estate. mitigating SBA collateral came primary through in our remaining risk million the relationship originated transactions real $X.X $X.X approximately of institution. XXXX million The million us sheet, acquired totaled $X on an guaranteed two is this guarantees balance loans $X loss. SBA

fourth impairment in $X.X of for specific accounted of in review, Subjecting reserve quarter. $XXX,XXX loans our for for these potential to loss a the reserve three provision million have we accounted or

the value XX to Page marks. at with million the impairment XX.XX provision basis XXX points us $X.X to previously discussed, takes fair expense of our Turning of loans including

like others, January As we CECL know, you adopted on X.

modifiers impact be expectation from macroeconomic us with portfolio general on driven with period-to-period. conditions conversion direction the the guidance the our losses in under that as assessment for risk allowance based of it direction other is to we of change line Our own credit coming expect the to to the in in CECL is banks in of would by periods for

it With Tim. that, I'll turn to back

you, Chris. Thank you. thank Okay,

look onset work and environment way. challenges to the really hard continues we of bring pandemic improve bank continue the team and our the the I'm one along the to Since each address to forward proud and XXXX. of new to

are questions. support. That happy your our presentation concludes to and any answer we We appreciate

[Operator Instructions] And Hovde from Rabatin Group. our first question comes from Brett

Your line is open. now

be taking question. year. half maybe with expectations you X.XX%, comfortable margin you Hi, morning of and December good the seems you case start-off if previously. a Appreciate little Wanted spread the for the would the what than just margin And your I with And just have lighter guys. of first that had the would thinking then to the the be been about helpful. that think

not make the being I was more if so Thanks. such or to deposits lending side understood that's that primarily just to or if sure expensive. as able the yields want that Just on accelerate you're fast

the spread margin. So, let about question. first question. you and Mike Thank And I'll the loan good start I'll talk the on for

multiply, is cost. just your you're an it multiply just then X% assuming on by points right, take your napkin minus it or that FTP excel. and spread, spread a $X But you million to take you can basis a XXX if You of sort and got do

of basis of to basis Memphis churches and at assign to there's over then in there when expense banks I level a XXX spread. remember going level operating would there XXX spread. credit point XX%, where you large times other me some point do If I that at really want mean expense, taxes to was some today competitors get was I you're

If you ROA. to going think to a not that, expenses, you're about and expenses if commissions, going operating get XXX you're taxes have

sometimes a get it's the that and try we rough for me, to thumb just don't. XXX, my minimum Brett, been a on So career of commercial I of side, do teams in my rule

back you that to Last my go points in spreads I if fall commercial XXX range. basis from were memory quarter think our XXXX, fourth the of that

As mentioning XXXX, me at might discipline we enter the match and rates. went rates And much. of move the sort up, we of market remember spring extreme rise probably you and rates and that we that have hold wanted not underlying to banks did base too FHLB as to their tight

rates XXX spreads, we put from the the first last on the of the year range. we're think we So put memory, on in I half

don't were with need to the but loan do on I X.X%. about we strategies, of Arkansas, the talked quarter to would And put I pleased as And as trying out that how we so, glad I'm need can. a saw follow was deposit to trying to am a pleased bank XXX. again in they in up make production as I so to our at I'm side, some keep much be actually new normal was that that their someone and that that see think well get great we environment, this them I they XXX on operating home note it

will turn margin Mike it over I to a is December I that the question. good think to talk Now about and

Right.

the question. you, thank So appreciate

XXX. pickup up pressure did in quarter. beta the related So saw compressed in the in pick Fed our We at to about quarter. moves see we the to pricing late deposit And December margin

quarter. getting if deposit Fed's is hopeful banks basis pressure competing And with pick pricing that are we the on of sort pricing basis. of that saw that move We an next ahead are late a up standpoint. But from of in some clearly the exception promotion

historic when side of said, the Tim rates I we to the more the home getting as match-funded, we were very getting is spread And was lows aggressive it over historic than on deposit more contribute difficult loan even lows. targeted When loan side, get spread in say would were one at to margin on much margin with terms deposit at did the we've thing spread pricing, loan. home are rates to deposit side on the always

trying have year Even our ranged will competitor to responding of to a XX, are the points and and loan, relationships below profitable XX attract home be we've offers loan never to in wholesale alternatives. go XX, above which we brokered been match exception not competitor really broad add terms our funded retain and to home rates, or been they've basis flexible potentially wholesale we to to rates customers pricing, tapping wholesale deposit

if bit on So still deposit the deposit are the aggressive in than less the even spreads side, reasonably little more year. a so we earlier pricing, getting attractive

to and helpful. number, pace That's wanted quarterly business environment. on current the they in some Okay. And to are like the just then the banks to make sure heard wanted less turn $X I've that to SBA, million what then the that of and say optimistic look improvement the might SBA I understood

And credit wanted and from to it sure the decision be just so to I expectations bulk perspective. I of might the the a understood what make just

I'd note. A is this Sure, couple things Brett, that of Chris.

every SBA Alone And say guaranteed compare under been out space like that that suspect a XX% period these some the X% year is so that less. fee or could on. of you this lenders two there or the a have around XX% years you premium, over I If where are something other and portion to pressure, go expectations sell time, for margins premium ago for impacts okay? might of in business

or on of levels fairly we I rapid. by the run-rate $X another am at current push end about mentioned that of think that the year, be will trajectory I we I it So quarter at as I the that but in envelope that. before to that the we think growth, be for need optimistic to will two million settle

from performance mean, an public company so I a different might continue actually great of one those understand to to seeking to we improve build to and build that mandates and last, we our it. a that, company add investors this us, to go different this is and and we want we're And didn't institution want we there's came Brett, as running we for I

an don't say And do look and would want at anything but value, we I as Live to so at you to to that's have will they've profitable built investment to think look over evaluate great or the not time. don't accretive but we institution, pretend be Oak, it our with this product

we financial things want want spreads also the the great go well-rounded business of slow, going it we it and make and they've that a We -- So go. from so CapStar and way These SBA we very earnings, do different it brand where want we've but we're referenced will right? got to to people checked and institution. and come want and to a a are fast, units and top done time we to to quality reputations, and it build go to right long generate the continues XX

Okay, using that's was see With If CECL on for basis could cetera. sneak one your last XX reserves seems industry reserve like the one CECL, of the I think implementation, et just mentioned I Chris, on I it model some assuming CRE you rebuilding in Moody's could great. points. XQ think we and

of somewhat to current So Thanks. a anticipate you kind the of and an if environment Chris, from levels uncertain hear reserve building X.XX%. wanted of of

macroeconomic that, would is yes, is kind answer so the CECL it's tied What of and I Well loss indicator to and hard that that. trends to say of overtime. I predictable heavily has been resilient national most think,

that we to on criteria. modify have So, opportunity the I qualitative mean based

that commercial real mitigates cycle valuations. equity estate risks a lower for and cyclical model specifically for we anomalies and the rates from estate, you commercial again, remind mentioned You which business real be underwriting higher I'll has us high against to in instance, continues our model, and believe

know that if question, that's the that. don't but about answers best probably guidance I your

of here, have line don't our he well, and evaluating adopted me with had of as adjustment valuing I to in Jeff - adopted. we correct the asking. the term. anything And -- environment January Controller but to what Could I X, tend know go for don't seesaw what investors as something more But when adopting get I add and the we have banks be from think to economy, for so the I here, banks I due have range previously reserves Moody had think off maybe correct don't the is adoption I track I to they've that's of current And think that if appears I to -- the are it. what in up, the other the they - should CECL banks and it's that but have think adopt expect when other the

but nothing the then expert please And your I'm an and will say, would more or way correct one as not Brett, me. I on question determine it, nothing but other, that the macro Jeff, environment so changes

nothing other adoption we've so think seen from normal than more companies. I that maybe levels

Correct.

Okay, he is that. confirming

the helpful. color, guys. Okay, for really Thanks all that's

And from one our Sandler. Graham And moment next you. Thank for next question. Dick from Piper question our comes

open. Your line now is

Hi, good guys. morning

Graham. morning, Good

to or into the margin circle at to back as you'll X.XX% conversation it in maybe above to or of size and near see how month? When the mentioned trending that - you at expect and term? that kind XQ, bit you little X.XX% the it XQ would level about I accelerating Just a be the beginning December guys guess margin you the quickly year during wanted of margin look betas this to large

working it to Tim, would that to we and to I mean promise be you it and this challenging. I macro and hard I go this up it's as we're continue to is going to a love and a going is item sort industry - as was want able a and would to apologize of - anybody, follow working very conservative hard, much you as know, we're Well person. we've been going up as I recent trends

going we're So work hard. to

those projects and and and spread tempering going that to our to to working on I loan we're really focusing you. been on main mentioned be then hard We've pricing growth extra

So give I answer conservative an a to don't person. as you have

we're be Fed probably six that that as we're and level think or that slightly the the that increases viewing hopefully will its that months. next rate slows this probably down I hoping

Hopefully that the of a deposit said, will But next want wouldn't over-deliver I ahead these otherwise to you hopefully, the and of as increase. slow now calm lead Mike are environment some banks on from level person right side. to and and kind I'm it's raising of getting operating challenging banks under-promise some

bank hit just are balance I X.X% mentioned guess, could and you guess now share also And seeing that's this that I and new specifically the the helpful to Okay, production wondering that's expect on loan be helpful. in as what CDs sheet terms home pricing see or today getting your right the on pipeline well? what what side, would you brokered loan can then you in wholesale you of year yield at if guys

we'll so general, here X.XX%, with, kind Officer, brokered Kevin just Okay, a start in who maybe seeing is is Credit may deal, And maybe rates in Lambert, Mike you're our on who then not of ask pitch X.XX% Kevin. CDs on so, I'll specific pitch Chief Kevin. he but can

have as far seen range. to and as range - the higher - - X% rates in probably the we'll of you X% the that kind rates On go

and about out Kevin we have yes side. looking and months. to issuing right really Monday pricing All at brokerage I say nine of the as been generally on would

week futures. months around issuing looking brokered loan, around Three X.XX% right say six we'd would we we nine issuing X.XX% curve - compare compare funds - the each it Fed again, X.XX%. be would I X.XX%. to our at home on And out all on our in rates around we also months, be So now, to month

those about rolling be cost be funds to fed's home over in to source the futures now tapping And be home year. we're of and very are. where XX are that the where our XX So, loan most the borrowings to right loan will points trying course six do continues prudent basis under of yes about broker month terms suggesting overnight effective under

pricing that wholesale hopefully current a we're looking sense at. the you for gives So

mortgage wanted unit banking I expenses. this guess, know expense Definitely, that's one And very quarter? the was to helpful. I one quick just what on just

million is Our $X.X he it teammate, is runs is was Rhodes gentleman Glen again think I around - that approximate tremendous. our that $X.X And million, that I here Graham. approximately believe

issue on just I real you're and may it's think and that's other no gain a an sale, in volume. lowest have the I'm just had from as he pro this banks, hearing to they're sure he's was history limited

maybe but And town. a from is is fortunately get, additional, company reductions. We week mortgage came that the a potential this of we've the some did another you doing operating interviewed there spreads on and for further but are volume big The person got of actually about her it's - companies expense, twice in there that reduce balance laid-off - we're $XXX,XXX a again. interviewing back

short-term to - blew mortgage damage have earnings, really we environment that monitor an really outstanding not the it's blew metro up for hate up We but with Weatherford company, And it's we to for a continue it when money Chris monoline that the Tietz. we'll and high-quality with I didn't expand it purchase shop a say Hart Nashville. expand refi for in

and course, point, sale as in the encouraged that have pickup seeing the view the have the of going and we on applications, a the March volumes, watershed we Graham, gone of point application kind important I'll margins being to up periods where are on at April gain rates. declining year see Yes come of we gauge we're rest down rates this out by

we're been quality have our market. The kind of and of where a the for housing resilience five originator markets really mortgage demand Tennessee, historically incumbent in the in Middle quantity - particularly top

all guys. that's great, very helpful, Okay, thanks

Okay, you. thank

you. question. And from for D.A. Davidson. next question Fitzsimmons from moment Kevin next our comes one our thank And And

open. line now is Your

Hi, everyone. good afternoon,

Kevin. Hi

about dollars information all talked loan but more is we've a lot and NII here margin, the likely growth we at if look the we if the of of first limited. appreciate half So are year in

of half year the of in you to So dollars to down growth likely NII and more maybe is - to is sheet pressure first up half be flat overall hopeful flat back the goes balance from in under and that goes the margins - it the of that limited are the and will year?

the liquidity just quality see overall the just know the is think on I'd I to backside one definitely and that side. of managing sheet. and on issue, balance the first like you Well,

quarter other issue. the mentioned having division, the in You Mike the fourth correspondent - know same our banks are

to customers. there they correspondent balances and because issues pros are having with cons So is, too

And decline. we're about the half correspondent so our balance is

I We what metro of really had been had Nashville. and hot money money, some some leaving. customer decline has that's large CapStar historically don't rate to it call want but more some sensitive

I Tim's didn't of a new correspondent hope announced listed down, we when what I from as have to correspondent settles happened as I would that - do previously. one would I mention Kevin sort the strategy, I So I banker love them perspective, say,

had banker deposits correspondent top in Horizon. portfolio. actually in the was $XXX million scare to don't He First at you he want his I

with him grow customer we we're to can and hopefully, stem working deposits. So correspondent the hopefully core be going

love add sensitive in begin know half, question, your half be deposits. You I more second may larger we definitely to that the can fled first rate and but see the have would to to we're

It of NII, on may hurts it further to customer outgrow be even trends fourth the Want would we make monitor of declines. margin goal. that come at a quarter a thinner not there's, spread, though some can the sure maybe little where to this bit,

deposit about mostly like was that's about of it kind that is next fund question outlook helpful. But about I is to growth here growth that's just said loan into for what going is leads and And goal deposits. is the given you my loan-to-deposit ratio XX% seems loan side ask with obviously your deposits, larger. Okay, you

and ratio CDs report bank deposits. keep know this -- When to you mind, that's loan or of deposit others, customer reporting public XX%, probably more environment our is deposits, in mind XX%. you brokered that in reported in are sort for especially Keep in our regulatory reporting

look ratio million our so in or chart brokered benefit So loan-to-deposit of when you $XXX the that already. PowerPoint the range, CDs of in at with that's XX of the

core if now. around so, right I XX% it say our So that probably core our is call want you loan-to-deposit or ratio to would

that are be you where to being. Tim, want Where do you comfortable with. with that

ratio? loan-to-deposit That

Yes.

in think range. that I

banks You our how for ratio first then. so we of that's XXX back run well-thought-out our go I'm know, and was don't XX% or that's assets. have I I we today, at met think is from used have memory I'd back generally SouthTrust, policy funding sure was loan-to-deposit to when wholesale XXX back, Board to when approved pretty

And so America banks the customer-funded. are best in obviously, sheets that and balance are XXX% loans customer XXX%

to XX%. So XX% availability And up I using on we're now XXX% some right have that then to And a that think of XX%. customer-funded.

that. and do and So range the XX% customers said, we as I have the

you're think going this environment, wholesale. I use So to some in

we've to you think especially to are actually going sheet, has going looking and guy. some anything but I'm and start bank and our most rate-sensitive forward do this brokered I look I correspondent type get the use trying getting team CDs, And done some asked traction. them really with myself and our balance has on to spring Chuck forward get hopefully, with our involved new to we to slowed

both that to sort same because balance national showed I quarter. up our forgot irrelevant to the today's that CapStar about talking sides, this customer this On this shared it's Kevin, credits we on is topic, best Board sheet quarter. unrelated, we it just but of bring discussion know of

on side be our of and to which turned balance a X.X% the loan the loans, side, we've our term. customer deposit goal would sheet really my that think I long

Tim. Great point. much, very Thanks

Thank Kevin, you,

Strickland -- And please. moment next next And our And our comes question you. Janney one thank question, for from from Feddie

morning. good Hi

Feddie. Hi,

to expenses million the and Just guide. I make If expenses the for in to second go mortgage numbers. back $X.X fourth quarter expense from out I a back understand want that sure

occur get imply are I going and Are that seems sort is quarter guidance the all little million expenses what the a think for an actually to on quarterly of the $XX see average in just is the $XX.X fourth million quarters yet? the about if all first But starting the rise XXXX to rate to in you'll down kind going average a or quarterly that's we $XX.X - million, quarter expenses mortgage that's in And bit that year? core bank I you of to basis. of quarter? together, your ex

because with. much we First pretty good of what that's and all, good math up job came

that of we've so yes, some is banks these me So fee the other to little businesses. got CapStar unusual a versus

And on steady. it around so - sometimes charges because get your more I'm frustrating the the sheet are of even it's arms which just balance service to - maybe and to bigger deposit steadier a used internally fees

but under-promise mean want we want why I to in that's the to past also over I $XX.X million. I don't deliver. want we've So said, ultraconservative, - hey, be and don't to

with that under is to But little under $XX.X also put been a fourth operate we quarter. in up bit. So reverse what got range continued after million we know quarter, that I we that about that quarter generally some there questions the recovery we've were came third out there $XX.X that's you fourth in generally when million. we've

quarter comes there'll the SBA. that, $XXX,XXX on like million in the $X.X And put you then If back. you first be said it's for FICA remember remember additional

$XXX,XXX a didn't any do not backed or is quarter. any have fourth secondly, And out then So in back in. fourth that because had we comes accrual did incentive executive number quarter in that quarter $XXX,XXX third and

just got offline, back mind but in track tax are the get you So generally you on FICA keep added you've coming can back. with you've I but Feddie, recovery,

quarter. it Feddie $XXX,XXX about accrual is a $XXX,XXX loan think quarter enforced. runs It's executive for when $XXX,XXX that the executive wasn't I the or a

slow. you the FICA then million got you've year we on it continue then to have So throughout and variable you your the which the $XX.X just mortgage some. rate that really and $XXX,XXX you've of the run stays sort had a of that to got got doesn't far be that million, again would business to in run got could that at lot you $XXX,XXX, of you've gets $X.X Not core it if the core look There's it. underneath the

be be Got you expenses little higher, sale you. a And have know? little better, on will little I better you'll a because a the will higher on if guess that's the revenue gain but mortgage,

if frog - that absolutely in That's think throat. at correct. you $XXX,XXX and correct there was me, exactly Correct, a got perhaps I in fees excuse That's look - on I mortgage. fourth quarter, my

would SBA. and revenues $X.X correct million number expense. to I get some forth. are up there revenue if and up the that million, be with you that The does of associated same have that went $X commission went some thing commissions level. be number for of million But sort But there'd So the million, that if you $X you so $XXX,XXX, it would $X.X additional gave in that for

when either Got markets existing it. just or more you? new further expansion And speaking, me what just to you're markets one last are or IPO with augmenting then your investment, you going be one broadly about on left is an focused team have internal that out in from more talking or considering

great management is we Well, was before 'XX like of whenever fabulous my we a company the lot to to direction the to we've if performance our view but little a last And say right and environment, quarter December, I changed changed now. little and company Board of we've maybe had was this was strategic have was - fourth and would profitability team lower, perhaps back bit. little to rate start towards that We've or go this positive enough done a it more the a aspects a little a growth it culture slower. a with,

do to think worked. I and they've investments these wanted So

we I million and covered today banks. almost are $XXX and Knoxville specifically than but They don't FCB. Athens are Chattanooga bigger think it

for bank that I think shares, have million $XX Athens on. handout almost may $XXX $XXX may bought have we million and handed that's we so didn't bought for out shares we million FCB,

rate that a side, that's we've customers and like done would continue million. need think in it to keep need great really those before and get really $XXX they even environment. And maximize bankers a we markets fund got look the those have with getting the already a have and the to that bankers enough. I we they've those would markets, the maybe to We said I in markets so have more goal before deposit And and don't So team. for team environment. we but my be lot wonderful rate emphasis

don't know was in came our have don't fee business. step a This with somebody fee businesses. SBA I that today, would going markets current and we really think with we already core SBA. on into new line-of-business enough our if I a were new we

what and there had would some think really it was to we've this wins, thought of here I we are we sort solidify do. but attempting and

Got the it. Tim. Appreciate color. Thanks

you, thank Feddie. Okay,

And Brett have Group. question follow-up One from from Rabatin a And thank question. Hovde And you. we a comes follow-up please. moment

is line now open. Your

Hi guys.

Just one quick follow-up.

about players. you talked in the You competition markets had two clearly and the

our trying think, of get of deposit in I terms the by to curve being aggressive. growing base ahead for year this

as that you opposed And particular of some so can suppliers XQ it the make heavy did in to and an argument lifting those XQ. in two in doing XQ

And Middle what December seeing changes the maybe, from Thanks. so fourth competition. today linked-quarter or anyway. argument funding in in particularly you slowed could that for versus you're to Tennessee I'm and on thesis maybe the and make maybe could well, just that on perspective the on the an pressures quarter you say, pace get wanted in your

I'll way. just then I does in and first fighting everybody comment. everybody think, and is a the think I'll job, Well, got Tennessee can competitors first and Mike of through say outstanding Nashville all, comment so and I great same we've this,

could argument that. you I an think make to

I think back to Fitzsimmons. it goes Kevin

would earnings And have ROE. it's are and down, it's slowing we in not third markets You thing. you good it's I bank and I there long-term, state a are ROA and isn't are growth if facing to to I but know but a I goal the nice great I in the what for the the you think all the a see I want have same can be bank where in long-term, or that know attrition have for know, the not this is largest we want is think or future. or fourth long margin,

if a what I'm was or exact that asking doing balance I more think they're all that's I think we were strategy. So, doing have I don't earlier. But follow they of sure seen Kevin good sheets. their not it's what

of it's allows hopeful set just the in get going to I we're that And us of and the short-term will sort saying do through and to going can there half cost think we first it. environment overtime it NII to ploughing the grow in they're and I'm year.

in did had extent think may of I we seen have pricing point I be, know this bit mentioned, I the a some I Tim. you to touched we're would getting don't think their little and might our we've add banks are seen aggressive, we to mention a the Again, might I I the that banks which Fed And thank that to but QX. we next -- some case. don't competing don't discussing is what I is know that challenges. move. would with more upside ahead earlier have and that your potential deal ahead hope that Yes, that hope mind to from, margin. in know you, what trying to the including with rates We to us of certainly on and in extent We predict markets but see And give competitor get I liquidity hard that to the be have possibility. might mean so

we as would outlook I I provide, think to so we be said, in cautious But Tim want any say, will tell. and conservative time

by day monitoring really day. are We conditions

We people seeing. the have what very active they're in on field dialog with

hope the we've competing do that been so will And we with slow. rates that

Okay, that's Thanks helpful it. appreciate guys.

remarks. would questions. showing Schools I for you. turn further closing back And to now thank I'm no the like to And over call Tim

Have everybody to of this out appreciate us. call a their speak time Okay, with good the today we taking day and concludes listen and weekend.

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